BBY · Q2 2026 Earnings

Cautious

Best Buy

Reported August 28, 2025

30-second summary

30-second take: Best Buy beat its own Q2 guide — comparable sales +1.6% vs. "slightly down" guidance, adjusted operating income rate 3.9% vs. ~3.6% — yet refused to raise FY26, citing tariff uncertainty in the back half. Q3 is guided to a similar 1.6% comp but with operating margin flat YoY at ~3.7%, implying the Q2 margin beat doesn't extend.

Headline numbers

EPS

Q2 FY2026

$1.28

Revenue

Q2 FY2026

$9.44B

+1.6% YoY

Gross margin

Q2 FY2026

23.2%

Operating margin

Q2 FY2026

2.7%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$9.44B	+1.6%	$8.77B	+7.7%
EPS	$1.28	—	$1.15	+11.3%
Gross margin	23.2%	—	23.4%	-20bps
Operating margin	2.7%	—	2.5%	+20bps

Guidance

Q2 beat on both comparable sales and operating income rate; full-year FY2026 guidance reaffirmed across all metrics, though share repurchase guidance withdrawn.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Comparable Sales Growth	Q2 FY2026	slightly down vs. last year	1.6%	+1.6pts above guide	Beat
Adjusted Operating Income Rate	Q2 FY2026	approximately 3.6%	3.9%	+30bps above guide	Beat

New guidance

Metric	Period	Guide	YoY
Comparable Sales Growth	Q3 FY2026	approximately 1.6% (similar to Q2 FY26)	—
Adjusted Operating Income Rate	Q3 FY2026	approximately 3.7% (flat to prior-year Q3)	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Share Repurchases	FY 2026	approximately $300 million	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Revenue ($41.1B to $41.9B), Adjusted Diluted EPS ($6.15 to $6.30), Adjusted Operating Income Rate (approximately 4.2%), Adjusted Effective Income Tax Rate (approximately 25.0%), Capital Expenditures (approximately $700 million)

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
Domestic	$8.698B	+0.9%
International	$0.74B	+11.3%

Platform metrics

Q2 FY2026

Segment	Q2 FY2026
Comparable Sales Growth	1.6%
Domestic Comparable Sales Growth	1.1%
Domestic Online Comparable Sales Growth	5.1%
International Comparable Sales Growth	7.6%
Online Revenue as % of Domestic Total	32.8%

Profitability

Q2 FY2026

Segment	Q2 FY2026
Adjusted Operating Income Rate	3.9%
Domestic Adjusted Operating Income Rate	4.0%
International Adjusted Operating Income Rate	2.4%

Management tone

Tariff framing shifted from quantified arithmetic to unquantified back-half uncertainty. Last quarter management said the updated guidance included their best estimate of the range of financial impacts from tariffs — a confident attempt to bound the unknown. This quarter: "Given the uncertainty of potential tariff impacts in the back half, both on consumers overall as well as our business, we feel it is prudent to maintain the annual guidance we provided last quarter." The shift is meaningful: management's willingness to forecast around tariffs has weakened despite a clean Q2 beat.

The China COGS mitigation story was refreshed but the narrative softened. Management updated China sourcing to 30-35% of product COGS (vs. 55% shared back in March) and a blended effective tariff rate of ~16% (vs. prior 12-13%). But the narrative also pivoted to vendor cost-sharing ("some absorb, some adjust promotions, some time increases with launches") and promotional intensity ("both breadth and depth of promotions higher than last year"). That's a softer mitigation thesis than the clean arithmetic from Q1.

Margin framing has degraded for a second straight quarter. Q1: "product margin rates are now expected to be unfavorable compared to last year." Q2: "We expect gross profit rate pressure will be similar, if not a little higher, than it was in the first half of the year." "A little higher" pressure in H2 against an already-degraded H1 base is a quiet downgrade, even with operating margin guidance reaffirmed at 4.2% — implying SG&A leverage and efficiencies are doing more of the work.

The Best Buy Health "Care at Home" exit, dropped almost casually, signals a real shift in how management talks about strategic bets. "Other times, [efficiencies] are the result of us moving on from initiatives that aren't generating the financial return in the timeline we had originally envisioned, such as the exit of our Care at Home Best Buy Health initiative." This was a multi-year growth pillar, and its quiet exit suggests capital and management attention are being pulled back from non-core bets.

Confidence on demand is paradoxically higher than the guide implies. Management said they're "trending toward the higher end of our sales range" — and Q3 is guided to a similar +1.6% comp despite lapping the Switch 2 launch. That should warrant a raise. The decision not to raise is the tell.

Recurring themes management leaned on this quarter:

Omni-channel customer experience and vendor partnershipsNew profit stream development (Marketplace, Best Buy Ads, healthcare exit)Supply chain modernization and cost efficienciesCategory-specific momentum (gaming, computing, mobile) offset by weakness (home theater, appliances)Tariff headwinds and pricing strategyInnovation-driven sales model reliance

Risks management surfaced:

Potential tariff impacts on consumers and business in back halfOngoing product margin rate pressure from lower-margin category mixInternational gross profit rate decline from category mix shiftCannibalization risk from Marketplace launch on first-party revenueQ3 adjusted SG&A expected higher than last year

Q&A highlights

Chris Horvers · JP Morgan

How is Best Buy thinking about risks around the consumer regarding tariff-induced price increases, elasticity surprises, and Q3 guidance (low single digits). Is the company being prudent about potential downturns between events?

Management stated Q2 tariffs were in line with expectations and not material to results. Only 2-3% of products are directly imported. Mitigation strategies (manufacturing flexibility, cost negotiations, country diversification, selective pricing) result in cost increases materially lower than effective tariff rates. Q3 guidance of low single digits reflects strong back-to-school momentum offset by typical September-October slowdown before holidays.

Only 2-3% of products directly importedMitigation strategies keep cost increases materially below effective tariff rateQ3 comps tracking low single digits in AugustBack-to-school events performing strongly

Michael Lasser · UBS Financial

Best Buy has historically faced pressures on core consumer electronics profit pool. How is the company evolving strategy—through marketplace, ads, vendor partnerships—to drive growth beyond harvesting? Separately, how much will Best Buy invest from emerging profit pools (ads, marketplace) to stabilize challenged categories like home theater and appliances?

Management outlined three strategic pillars: (1) marketplace to recapture third-party seller share; (2) growing ad business to fuel reinvestment in price and customer experience; (3) deepening vendor partnerships for immersive, differentiated experiences beyond SKU competition. On challenged categories, management is modifying assortment and placement for TVs and appliances, expanding vendor relationships (TCL, Hisense, LG), and adding marketing investment. Product margin rates expected lower YoY due to mix and competitive pricing, but profitability guidance unchanged.

Marketplace launched to stabilize share in categories shifted to third-party sellersAd business growth fueling reinvestment in price and CXTV category seeing shift towards value; vendor partnerships expanding with TCL, Hisense, LGAppliances market focused on duress; company shifting from duress to package assortments

Kate McShane · Goldman Sachs

Vendor labor support is up 20%. What changes are driving this, and is management baking in sales lift from this increased investment?

Vendor support is growing across multiple vectors beyond just labor: physical space upgrades, associate training, Best Buy ads, membership, app/digital vendor shops, supply chain/fulfillment partnerships, reverse logistics, and trade-in/recycling. Management views this as a unique set of assets that differentiate Best Buy from competitors and provide highly relevant traffic both in-store and digitally, with unique expert sales and service.

Vendor labor investment up 20%Support extends beyond labor to physical space upgrades and trainingVendor partnerships across Best Buy ads, membership, app, fulfillment, reverse logistics, trade-inVendor support described as generating highly relevant traffic and unique expert sales/service

Seth Stigman · Barclays

How did market share perform in Q2 versus Q1? How do Switch launch benefits and iPad comps flow into Q3 guidance of similar comps to Q2?

Management noted flat overall share in Q2 with good momentum; share is described as variable quarter-to-quarter but a long-game conversation. Q3 similar comps to Q2 are driven by: (1) continued gaming growth from Switch (less than Q2 boost), (2) strong iPad/mobile computing performance comping against prior-year iPad launch, (3) growth in mobile phones. Gaming remains strong across handheld (Windows, Steam) and Switch platforms.

Q2 share flat overall; momentum felt positiveQ3 comps similar to Q2 despite Q2 Switch launch benefitQ3 gaming growth continues but less than Q2 Switch contributioniPad/computing showing better performance in Q3

Steve Forbes · Guggenheim

How are promotional calendar depth and frequency shaping up for back half versus prior year? How does this impact forecasting given consumer attraction to events?

Management indicated both breadth and depth of promotions are higher than last year and baked into guidance. Company is strategically timing promotions (e.g., Black Friday in July success) in partnership with vendors to stimulate demand. Tariff mitigation includes vendor cost-sharing approaches that vary by vendor and product, with some vendors absorbing costs, adjusting promotions, timing price increases with launches, or balancing across global supply chains. Management emphasized ability to maintain broad assortment from opening price point to premium despite cost pressures.

Both breadth and depth of promotions higher than last yearPromotional calendar assumed higher in guidance for H2Black Friday in July was successful promotional eventVendor tariff cost-sharing approaches vary: some absorb, some adjust promotions, some time increases with launches

Answers to last quarter's watch list

Q2 comp delivery vs. "slightly down" guide. Decisively beaten: +1.6% comp vs. slightly down guidance — a ~1.6pt swing. Domestic comps +1.1%, International +7.6%, online +5.1%. Switch 2 (Entertainment +37.5%) and Computing (+3.8%) drove the beat; appliances (-8.5%) and CE (-4.9%) continued to drag.

Resolved positively

Marketplace launch execution and disclosure. Marketplace launched mid-year but management provided no GMV, take rate, or 3P revenue figures on the call. Disclosure remains qualitative — Marketplace is positioned to "recapture share" in categories that have shifted to third-party sellers, with cannibalization acknowledged but unquantified.

Continue monitoring

China COGS percentage trajectory. Management updated China sourcing to 30-35% of product COGS (vs. 55% in March) and a blended effective tariff rate of ~16%, but pivoted to softer vendor cost-sharing language alongside the figures. Status: Resolved, with caveats.

Adj. operating income rate run-rate vs. 4.2% FY target. Q2 printed 3.9% (vs. 3.6% guide). Q3 guided to ~3.7% (flat YoY). To hit 4.2% FY, Q4 needs to print roughly ~5.0%+ on the heaviest seasonal quarter — achievable but back-loaded. Q2 beat the Q1-flagged trough, but Q3's flat YoY guide means the catch-up is even more concentrated in Q4.

Continue monitoring

Product margin rate commentary. Management explicitly said H2 gross profit rate pressure will be "similar, if not a little higher" than H1. Q2 GM was 23.2%, -30bps YoY. The mix headwind from computing is intact and lengthening.

Resolved negatively

Consumer behavior assumption. Comps positive across both Domestic (+1.1%) and International (+7.6%); back-to-school called out as strong. No softening evident this quarter, though management's refusal to raise FY guidance citing "consumers overall" suggests internal forecasts are more conservative than the print.

Resolved positively

What to watch into next quarter

Q3 comp delivery against the ~1.6% "similar to Q2" framing — and whether FY guidance is finally raised. Management said they're trending to the high end of the FY comp range. Two consecutive quarters of beats without a raise becomes implausible; either Q3 disappoints or the FY range gets lifted in November.

Q4 adj. operating income rate implied by reaffirmed 4.2% FY. With H1 at 3.8%/3.9% and Q3 guided to ~3.7%, Q4 must clear roughly 5.0% — watch whether management starts walking this back in Q3 commentary.

Appliances trajectory. Down -8.5% in Q2 despite management's stated "intend to improve" plan via sharp pricing, vendor partnerships, and fulfillment investment. If Q3 is still -7% or worse, the back-half stabilization narrative fails.

Marketplace quantification. First full quarter post-launch will be Q3. Watch for any GMV, take rate, or 3P revenue disclosure — continued qualitative-only commentary indicates the contribution is immaterial or cannibalization is meaningfully offsetting.

Gross margin in Q3. Management telegraphed "similar, if not a little higher" pressure. A GM print worse than 23.0% would confirm the mix problem is accelerating into the Windows 10 EOL surge.

Sources

Best Buy Q2 FY2026 press release, filed 2025-08-28 — https://www.sec.gov/Archives/edgar/data/764478/000076447825000035/bby-fy26q2xexx99.htm
Best Buy Q2 FY2026 earnings call transcript and prepared remarks (management commentary and Q&A)

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